Monday, November 22, 2010

One young academically excellent person went to apply for a managerial position in a big company.

He passed the first interview, the director did the last interview, madethe last decision.

The director discovered from the CV that the youth's academic achievements were excellent all the way, from the secondary school until the postgraduate research, never had a year when he did not score.

The director asked, "Did you obtain any scholarships in school?" the youth answered "none".

The director asked, " Was it your father who paid for your school fees?" The youth answered, "My father passed away when I was one year old, it was my mother who paid for my school fees.

The director asked, " Where did your mother work?" The youth answered, "My mother worked as clothes cleaner. The director requested the youth to show his hands. The youth showed a pair of hands that were smooth and perfect.

The director said, "I have a request. When you go back today, go andclean your mother's hands, and then see me tomorrow morning.*

The youth felt that his chance of landing the job was high. When he went back, he happily requested his mother to let him clean her hands. His mother felt strange, happy but with mixed feelings, she showed her hands to the kid.

The youth cleaned his mother's hands slowly. His tear fell as he didthat. It was the first time he noticed that his mother's hands were so wrinkled, and there were so many bruises in her hands. Some bruises were so painful that his mother shivered when they were cleaned with water.

This was the first time the youth realized that it was this pair of hands that washed the clothes everyday to enable him to pay the school fee. The bruises in the mother's hands were the price that the mother had to pay for his graduation, academic excellence and his future.

After finishing the cleaning of his mother hands, the youth quietly washed all the remaining clothes for his mother.

That night, mother and son talked for a very long time.

Next morning, the youth went to the director's office.

The Director noticed the tears in the youth's eyes, asked: " Can you tell mewhat have you done and learned yesterday in your house?"

The youth answered, " I cleaned my mother's hand, and also finishedcleaning all the remaining clothes'

The Director asked, " please tell me your feelings."

The youth said, Number 1, I know now what is appreciation. Without my mother, there would not the successful me today. Number 2, by working together and helping my mother, only I now realize how difficult and tough it is to get something done. Number 3, I have come to appreciate the importance and value of family relationship.

The director said, " This is what I am looking for to be my manager. I want to recruit a person who can appreciate the help of others, a person who knows the sufferings ofothers to get things done, and a person who would not put money as his only goal in life. You are hired.

Later on, this young person worked very hard, and received the respect of his subordinates. Every employee worked diligently and as a team. The company's performance improved tremendously.

A child, who has been protected and habitually given whatever he wanted, would develop "entitlement mentality" and would always put himself first. He would be ignorant of his parent's efforts. When he starts work, he assumes that every person must listen to him, and when he becomes a manager, he would never know the sufferings of his employees and would always blame others. For this kind of people, who may be good academically, may be successful for a while, but eventually would not feel sense of achievement. He will grumble and be full of hatred and fight for more. If we are this kind of protective parents, are we really showing love or are we destroying the kid instead?*

You can let your kid live in a big house, eat a good meal, learn piano, watch a big screen TV. But when you are cutting grass, please let them experience it. After a meal, let them wash their plates and bowls together with their brothers and sisters. It is not because you do not have money to hire a maid, but it is because you want to love them in a right way. You want them to understand, no matter how rich their parents are, one day their hair will grow gray, same as the mother of that young person. The most important thing is your kid learns how to appreciate the effort and experience the difficulty and learns the ability to work with others to get things done.

Tuesday, November 9, 2010

Money and self-control: Spend smart, save more

Spending money has got many influencing factors. But all these influencers can be classified into five broad spending influencers.

1. Emotions

Your emotions play an important role in your spending pattern. Positive feelings like happiness, fun and joy can influence you to spend more on entertainment and gifts.

Negative feelings like envy, jealousy, shame, stress, depression and frustration can influence you to spend more on smoking, drinking, buying things you don't really need, relaxation and healthcare.

2. Traditional thought

This is because of you belief system and your thought process. Like somebody saying 'I need to buy a silk saree every year for my wedding anniversary'. Or, 'I have to bust crackers in Diwali.'

These are all the classic examples of how your traditional thoughts will influence your spending pattern

3. Society

Society in which you live will have more influence on your spending. For example, you have to buy a car as all your colleagues come to office in their own car. Or, on the occasion of your kid's birthday, you need to arrange gifts for all his/her classmates. Or, you should be watching this movie, on a first day first show.

This influencer is caused by friends, colleagues, neighbours, relatives, and club members. At times, even advertisements and promotional offers like a discount sale can make you to spend more.

4. Habits

Habits formed when you were growing up can make us spend impulsively. Generally this will be for our sensual pleasures. Spending on movies, music, eating out, smoking, drinking are the best examples for this influencer.

5. Commitments

This includes paying off your debts and loans, commitment towards family like school fees, buying groceries and other provisions, paying rent, paying for medical insurance etc. You are committed to pay these expenses.

By tracking and analysing your each and every expense, you will be able to identify the influencers that make you spend money. Here are some strategies to overcome these influencers and spend smarter:

1. Control your emotions

Instead of spending money, you can control your emotions by doing something else like doing yoga or meditation, watching comedy shows on TV, going to a temple or beach. You need to solve the root of the emotion. You need to do an introspection and keep a balanced mind always. A balanced mind is key for spending smarter.

2. Self talk

You need to consciously change your thought patterns to come out of traditional thinking.

'I don't really need a saree for every wedding anniversary'. 'I am not a kid; so I need not burst crackers on Diwali'. Such auto suggestions will change your thought process and help you to be able to really prioritise your expenses.

3. You are unique

You were born original, do not die a copy. There is no need to feel bad if you don't get to spend or buy things like your friends or people around you. You are unique and special in your own way. You need to discuss with your family and friends about 'How to live happily by achieving compromised spending patterns'.

4. Learn and unlearn habits

The unwanted habits that make you spend more can be unlearned. Good habits which make you spend smarter can be learned. Habits can be learned and unlearned. But you need to know it is not a quick fix. It involves a process and a commitment.

A habit is an intersection of knowledge, skill, and desire. Knowledge is 'what to do and why to do it'. That is we need to spend less to save more and become richer. Skill is in how to do it. Desire is the motivation, the want to do. What are we trying to achieve by spending less? How is it more important to us than spending more? In order to make something a habit in our lives, we have to have all three.

5. Unwanted commitments

You can't avoid certain commitments like groceries, schools fees. But you can definitely discontinue unwanted commitments like the club membership in which you are not actively participating in and not getting any real gains out of it; the chit fund you have impulsively enrolled in with a jewellery shop.

Money not spent is saved. These above strategies will work only if you truly have a desire for future financial success. You need to be disciplined and persistent in the course of implementing these strategies. The more you practice smart spending, the wealthier you become

In spite of steady, regular income there are so many individuals who live paycheque to paycheque, carry forward their credit card outstanding, and fail to save anything for retirement. If you are one of them, now is the right time to take action to not only come out of debt and stay out of debt.

It is not only possible; it is unbelievably achievable.

1. List down all your debts

You need to take stock of all your loans. It could be your credit card dues, personal loan, car loan, housing loan, education loan, loan from fixed deposit, loan from insurance policies, loan from your employer, hand loan and so on.

For each and every loan you need to note down how much you owe, the present interest rate, equated monthly installment and number of months to be paid.

2. Negotiate for lower interest rates

If you could negotiate the interest rate and bring it down then you can come out of debt faster.

Most of the credit card companies come forward for negotiation if you really show interest in repaying. They need not run after you to collect the debt. It will reduce their expenses.

So they will be happy to negotiate. Balance transfer offers from credit cards are also a way to reduce your interest rate.

Replacing a loan with another is known as refinancing debt. By doing a refinance it should reduce your interest rate and it should bring down the time you are in debt.

But most often people go for refinance that provide them lower EMI but increasing the time they stay in debt.

4. Categorise your debt

Housing loan can increase your net worth over a period of time. Housing loan gives you tax benefit also. For a businessman car loan provides some tax benefit.

Based on these factors a debt needs to be categorised. This will help you in comparing different loans

After sorting out various loans, now you can comfortably prioritise the loans. Obviously this will be based on the interest rates and tax benefits. At times paying off a small loan first can give you a lot of motivation to get out of debt.

6. Creating and executing a debt payoff plan

You need to create a debt pay off plan with different scenarios. So that you can find out how some more savings or a different repayment order will help you get out of debt faster. When creating a plan, you need to choose one which fits your attitude.

Otherwise, you may not execute it properly.

You need to make a vow that you will not be adding any fresh loans, till you come out of all your debts completely. Think for a moment, how you will feel when you become debt free.

This will give you a lot of positive energy to come out and stay out of debt.

8. Postpone buying major assets

Buying a property or any other assets need to be postponed till you get out of debt. With your new ownership comes the new, probably large and unpredictable expense.

This can make you deviate from your debt pay off plans and at times the consequences could be uncontrollable

There are two groups. One group of people uses credit cards responsibly.

That is they will repay the credit card dues in full when they receive the bill. The other group will pay the minimum amount due and carry forward the balance amount due.

If you belong to the second group, you need to stop using credit cards temporarily.

Take out and keep your credit cards in the locker. Once your financial situation and buying habits improve, then you can start using your credit cards again.

10. Change your spending habits

Being in debt obviously means that you have been living beyond your means. The solution is very simple.

Spend less than you earn and you will get out of debt soon. You need to change your spending habits. Then only this simple solution will be achievable.

If you buy things you don't need, you'll soon sell things you need. Don't save what is left after spending; spend what is left after saving

You need to inform all your family members and dependents about your debt status. Then you will be able to take decisions with much more clarity.

Moreover, if your family members know about your debt, they will also change their spending habits and support you in getting out of debt faster.

Consider the postage stamp: Its usefulness consists in the ability to stick to one thing till it gets there.

Similarly, you need to stick to your debt pay off plan till you get out of it.